Table of Content
You may want to consider things like contributing more to your 401 to get the full match from your employer or adding to your stock portfolio. Perhaps you might want to buy other real estate for income-potential. And if you have other existing debt, like credit cards, auto loans or business debt, it is best to pay those off first. Larry you are right, a lot of people do not stay in a home for 30 years.
However, there are 52 weeks in a year and just 12 months. Over the course of a year, you’ll make 26 biweekly payments which would total the amount of 13 monthly payments. In effect, you make an extra monthly payment each year. The extra money goes toward reducing principal, helping you pay the loan off more quickly. Let’s say you owe $100,000 on your 30-year loan at a 4 percent interest rate.
Bankrate
NoOne November 14, 2010It never ceases to surprise me that, with a bit of extra searching online, you can stumble on some of the most unique blogs. Jaggia June 19, 2009The article is v. much written for Indian context only as seen from the interest rate structure and the currency used theren. But there is yet another point needing clarification. Your bank will provide you with the amortization table, based on which you can make your calculations on how much interest you will save. By such an act, you are funding principal to fill the mismatch as outlined earlier. Hence the borrower should be thankful to the bank and adopt some measures, to help bank to improve the principal kitty.
I have lost faith in all advisors, insurance companies, the government, lawyers and bankers. My idea is to pre-pay my mortgage, invest somewhere so my property taxes and homeowners insurance are paid when I pay it off. Of course, there are opportunity tradeoffs to prepaying your mortgage. That extra money that you throw towards the loan could instead be used to invest in other ways to earn you money.
Top Fund Houses
The following month’s interest would be calculated on the outstanding home loan principal amount. If you prepay the home loan, you can substantially reduce the interest component of the home loan. The principal amount gets repaid faster, helping you close the home loan early.
There are lots of 10 year periods that don’t meet that assumption. Granted, Suzie’s return at 3.25% was guaranteed, but Ivan’s risk pays off huge. Those arguing in favor of Suzie are simply arguing out of ignorance. In addition, you’ve lost all of the possible gains during the 15 year period. Why is it that most people assume that the stock market is the only alternative that’s very limited thinking.
Savings Rates Are Terrible
If your goal is to pay less money to the lender in the long run, both refinancing and prepaying your mortgage can do this. If your primary goal is to lower your monthly payments, refinancing is probably the way to go; if you primary goal is to pay off your mortgage ASAP, prepayment may be the way to go. If you do decide to make prepayments on your mortgage, it is imperative that you point out what you want the extra money to go towards. Make sure that the extra funds go towards principal, not interest. You are not earning any equity on your home by paying interest in advance. If u prepay your loan in India , I think loan tenure decreases.
And if you actually have money or liquid assets set aside, you can use it for the down payment on the subsequent properties, instead of having it locked up in one home. There’s no rule for how much you need to pay other than your payment due. I get it though, there’s the emotional element. Some folks like the idea of being debt-free, for better or worse, financially. So if there was ever a loan to hold onto, a mortgage would be it, especially with rates where they’re at now. Let’s consider a hypothetical $250,000 loan amount tied to a 30-year fixed mortgage set at 3%.
We have also not considered the tax benefits on home loan repayment for simplicity. Have a look at the annual loan amortization table above again. You will realize that the interest component paid is higher during the initial years. During the latter years, the principal component is higher.
Let's say we experience a massive bout of deflation, what then? Doesn't my statement make this a foolish idea? You can start making prepayments on your mortgage at any time.
Larry Ludwig was the founder and editor in chief of Investor Junkie. He graduated from Clemson University with a bachelor of science in computers and a minor in business. Back in the ’90s, I helped create some of the first financial websites for firms like Chase, T. Rowe Price, and ING Bank, and later went on to work for Nomura Securities. He’s had a passion for investing since he was 20 years old and has owned multiple businesses for over 20 years.
V.Muthu krishnan August 16, 2017Nice blog.And it is very useful to the peoples who are all got bank loans. BankBazaar is the world's first neutral online marketplace for instant customised rate quotes on Loans, Credit Cards, Insurance and Investment products. Shop for financial products just like you buy everything else now - online.
If it was that easy then there would be a heck of a lot more rich people in America. So insane how this writer actually believes what he writes. And I can guarantee you this writer doesn’t make 8% per year on his investments. He probably panics every time the market sells off. Release your tax returns and then I will believe you. Also, 90% of America doesn’t know to just invest in an index fund and never sell.
No comments:
Post a Comment